11-30-2004, 01:11 AM
Hi problim creater
its very easy to understand diffrence between capital and assets, conside following-
CAPITAL
in accounting, capital is an investment of money (funds)with the intention of earning as return. Capital will also include proprietor's initial capital, introduced as cash and perhaps equipment or other assets.
ASSETS
an asset is something valuable which a business owns or has the use of. assets are rights or other access to future economic benifit as a result of past transections or events. eg a machine is an asset because it gives rights to future economic benifit (machine will be used in the business to make products and earn revenue.
In my own word(<img src=icon_smile_big.gif border=0 align=middle>) capital is a money invested by the owner and asset purchased from capital. therefore asset is liabilty of business ans look how its work in entries.
Assume Amjid want to start a business and he opens a business bank account. he puts £2500 in his business bank account now £2500 is capital.
CAPITL 2500 CR
CASH 2500 DR
and than he purchase a machinary (asset) for £1500
CAPITL 2500 CR
CASH 100 DR
ASSET (M) 1500 DR
here you can see asset has been purchased from capital and it didnt effect the capital but reduced the cash
I add one more sentence that capital also called ownership intrest (statment of principal) ans ASSETs <i>less</i> LIABILITIES = Ownership intrest
2)STRAIGHT LINE METHOD
where an asset gives you equal benifit/production every year during its economic life, we use straight line method.
where an asset gives you more benifit/production in staring years and less in later years then we use reducing balance method
3) as for as Jordon is concearn, i dont think that we can use any kind of accounting treatment for her.
Sajjad Dar
its very easy to understand diffrence between capital and assets, conside following-
CAPITAL
in accounting, capital is an investment of money (funds)with the intention of earning as return. Capital will also include proprietor's initial capital, introduced as cash and perhaps equipment or other assets.
ASSETS
an asset is something valuable which a business owns or has the use of. assets are rights or other access to future economic benifit as a result of past transections or events. eg a machine is an asset because it gives rights to future economic benifit (machine will be used in the business to make products and earn revenue.
In my own word(<img src=icon_smile_big.gif border=0 align=middle>) capital is a money invested by the owner and asset purchased from capital. therefore asset is liabilty of business ans look how its work in entries.
Assume Amjid want to start a business and he opens a business bank account. he puts £2500 in his business bank account now £2500 is capital.
CAPITL 2500 CR
CASH 2500 DR
and than he purchase a machinary (asset) for £1500
CAPITL 2500 CR
CASH 100 DR
ASSET (M) 1500 DR
here you can see asset has been purchased from capital and it didnt effect the capital but reduced the cash
I add one more sentence that capital also called ownership intrest (statment of principal) ans ASSETs <i>less</i> LIABILITIES = Ownership intrest
2)STRAIGHT LINE METHOD
where an asset gives you equal benifit/production every year during its economic life, we use straight line method.
where an asset gives you more benifit/production in staring years and less in later years then we use reducing balance method
3) as for as Jordon is concearn, i dont think that we can use any kind of accounting treatment for her.
Sajjad Dar